3/13/2008

Myth 174 - No Estate Duty

We have just scrapped Estate Duty and the super rich are all popping their champagne. I am going to argue that this is another Singapore myth.
What is Estate Duty? In brief it is a tax on a citizen's life long accummulation of wealth, his properties and money. With the scrapping of the Estate Duty, this is gone. For the average Singaporean, his life long accummulated wealth is his HDB flat and the money in his CPF. These are his material assets. All he has. HDB flat is safe, but not his CPF.
In a way the Estate Duty now comes in another form. It has transformed to tax the estate of a citizen in advance. You guess it, the Minimum Sum and the Medisave are Estate Duty taxed in advance. No they will tell you that they are different and for different objectives. And they will be returned to you at the appropriate time when they decide to.
So for 40, 50 or 60 years, maybe more, the citizens will be dumping real money into the CPF and in return they will get an IOU chit from the CPF saying how much it owes the citizen. And only the CPF has the authority to decide when to give it back to the citizen and at its terms.
Still not really like Estate Duty leh. True. Let's take an extreme case where a citizen only has a little Minimum Sum and his Medisave. And he dies without any surviving relations. Where does the money go to? This is as good as it gets to being an Estate Duty Tax. And it is 100% tax!
Whether this is equivalent or far from what Estate Duty is, it all depends on one's perception and definition. (Check with Matilah)
Now who does not pay this transformed Estate Duty? Those on pension scheme and the super rich who are able to work around the CPF ruling and not contributing to it. Even they do so, it is less than the smallest peanuts in relations to their wealth.

1 comment:

The scrapping of estate duty is to be celebrated. All taxes are a form of confiscation, and even one may "dislike" rich people (it is not a crime to be jealous) I for one would sooner have the money kept in private hands than handed over to the govt who'll use it to increase their power and influence.

At least I know if a rich guy/rich family has the money the WORSE they can do is yah-yah and spend (consume capital) to boost their ego. If the govt gets their hands on rich people's estates (usually substantial), there is NO TELLING WHAT they might use the money for. You can forget about "helping the poor". When govt "helps" it creates more poor -- the sacrificial lambs -- and the cronies get rich and powerful.

I'm glad that redbean has finally come to terms with the fact that social insurance contributions are a form of taxation (forced confiscation, aka "theft").

All taxes in a way are "taking in advance". Estate duty is the govts last chance to anally rape a citizen when his status changes form human being to human remains.

However looking at it by strict definition, Estate Duty is calculated on the value of the deceased estate. Taxes and levies (social insurance contributions) like MediSave and CPF are taken off the productivity, and that can only come from living individuals.

I'll purposely keep the tenor of this post vitriol-free to say something about CPF: The INTENTION of CPF may have been that to "mean well", but the fact remains COMPULSORY contributions is a form of slavery (you hand over part of your "productivity" to the state) and unlawful taxation. (non-consentual and involuntary).

Whilst it started off with "noble intentions", CPF tied to HDB has ecome a political tool used FREQUENTLY to manipulate the way citizens vote. Also, because of its long term UNsustainability, the state has to pass more and more legislation to avert a cash crisis (which is the ultimate consequence of a long pyramid game). Actually they won't succeed in averting the crisis, they'll merely PROLONG it from happening. But is will happen. When? No one can say for sure.

I got out most of my money from the CPF before they changed the rules. I only have a couple of grand there since I decided to keep my S'pore citizenship - mainly for tax and financial planning purposes. (when you work in Oz and USA, you need "tax haven". S'pore is great for that, although certain states in the US are pretty good too for dodging taxes)

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